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Government Grants, Plant Survival and Employment Growth: A Micro-Econometric Analysis

Author

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  • Girma, Sourafel

    (University of Nottingham)

  • Görg, Holger

    (Kiel Institute for the World Economy)

  • Strobl, Eric

    (University of Bern)

Abstract

In this paper we analyse the impact of governmental grant provision on plant performance. To this end we utilise rich information derived from three data sources for the manufacturing sector in Ireland, where grant provision has been an important part of the industrial policy. We use a matching technique combined with a difference-in-differences estimator in the empirical analysis. Our results indicate that particularly capital related, but also other types of grants can provide an important impetus to plant survival and employment growth. We also discover some differences in terms of the effectiveness of grants between foreign multinationals and domestic plants. Specifically, while grants have helped to stimulate employment creation in multinationals, they may not always be an effective way of ensuring that these remain in the host country. In contrast, grants have in general been successful in not only helping domestic plants to survive longer, but also to create more jobs.

Suggested Citation

  • Girma, Sourafel & Görg, Holger & Strobl, Eric, 2003. "Government Grants, Plant Survival and Employment Growth: A Micro-Econometric Analysis," IZA Discussion Papers 838, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp838
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    References listed on IDEAS

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    Cited by:

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    2. Meuleman, Miguel & De Maeseneire, Wouter, 2012. "Do R&D subsidies affect SMEs’ access to external financing?," Research Policy, Elsevier, vol. 41(3), pages 580-591.
    3. Richard Harris & Mary Trainor, 2007. "Impact of Government Intervention on Employment Change and Plant Closure in Northern Ireland, 1983-97," Regional Studies, Taylor & Francis Journals, vol. 41(1), pages 51-63.
    4. Hartsenko, Jelena & Sauga, Ako, 2013. "The role of financial support in SME and economic development in Estonia," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 9(2), pages 1-13, July.
    5. Jelena Hartsenko & Ako Sauga, 2013. "The role of financial support in SME and economic development in Estonia," Business and Economic Horizons (BEH), Prague Development Center, vol. 9(2), pages 10-22, July.
    6. Juana Rivera-Lirio & María Muñoz-Torres, 2010. "The Effectiveness of the Public Support Policies for the European Industry Financing as a Contribution to Sustainable Development," Journal of Business Ethics, Springer, vol. 94(4), pages 489-515, July.

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    More about this item

    Keywords

    difference-indifferences; matching; survival; employment; grants; government assistance;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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